History Favouring Euro’s Trend Breakout

<p>In each of the last six cases since 2002, whenever EUR/USD broke above one of its three main long-term moving averages (55, 100 or 100 […]</p>

In each of the last six cases since 2002, whenever EUR/USD broke above one of its three main long-term moving averages (55, 100 or 100 week MAs), it proceeded to break above the other two moving averages. With EUR/USD breaking above its 55-week moving average, it is set to cross above its 100-WMA (currently 1.3430) and 200-WMA (1.3533), which are 3.50% and 3.70% above the current market price of $1.3099. The road to $1.35 remains intact.

Spain 10-year yields are down 50-bps from Sep 28 piece “Win-Win for Bonos & BTPs?”, while Italian 10-year yields (BTPs) are seven-month lows below 4.80%.

Meanwhile in Greece, EU officials may finally approve the €31.5bn tranche of the €130bn rescue package. Even Germany is insisting that the remaining installment (originally due to be paid in June), will be released after ‘troika’ team complete its report on Greece’s compliance with reforms and austerity measures. One factor increasing the probability of Greece’s passing the “Troika Test” is the possible establishment of a special account for Athens to channel assistance from EU & IMF. The account will be strictly aimed at debt servicing instead of easing budget strains.

Italy 10-year yield breaks below key trendline. The 200-month moving average is also under assault. If this important moving average is not re-established below the yield by end of month, the follow-through to 4.50% is most likely as will likely be the case for 5% yield in 10-year Spanish bonos. Such are two of the main ingredients for $1.35 EUR/USD recipe.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.